I'm now going to post my shortest entry ever...
because i'm curious to hear what you all see as the "best new thing" you have heard about in the last two months...
I'm working on a new paper with Josh Spitzer on blended value
investing and we are gathering examples of a number of funds and
investment instruments that are being developed/rolled out around the
world...these capital tools offer some level of financial return and
performance together with strategic social impact and/or environmental
value. The paper will be presented at Davos 2006 (I'll post it after the
session), but working on it got me thinking about how many incredible
things are currently taking place around the world not only in the
capital arena, but in terms of
new types of organizations that are being created (for-profits with
strong social mission, nonprofits seeking to leverage economic value),
new leaders who are drawing upon business acumen in order to
create/lead new corporations to maximize their full, blended value
potential,
new frameworks for tracking performance of both capital and organizations,
and the implications of all this activity in terms of public policy,
the role of government, tax and regulatory structures and so forth...
The "trick" is that ALL the above are in
transition, being modified and re-tooled in order to ensure they create
and maximize the total value people seek to advance through their work
and lives...
Over coming weeks, I will begin reporting in on current conversations
I'm having and things I'm seeing in my various travels that hold what I
think to be real promise in terms of this work and all our efforts, but
I also wanted to tee this question up to those of you who are coming to
and beginning to use this site:
What do YOU see as the most promising ideas, efforts or initiatives?
I don't care if they are your own or ones you've simply heard
about, but what are some of the cooler things you've encountered in your
journey?
Look forward to hearing from you!
Jed
Blurring. Non-Divisible Value. Value Blends.
It is 3AM and snowing outside and I'm supposed to go meet a friend to go elk hunting...
In a future blog, we can explore why I eat meat and feel responsible
for securing same as opposed to forcing some poor cow to get injections
of various drugs, stand in some stinking feedlot to get beefed up (so to
speak...) and then listen to the screams of its comrades as it marches
to its death...
but that is not a topic we will cover today, because something else is eating at me and I just need to say one thing:
If i hear one more person talk about the blurring of the
boundaries between nonprofit and for-profit, I fear i will toss my
lunch...
Over the past years, there has been a great deal of debate regarding
whether nonprofit organizations should engage in revenue generation and
corporations be held responsible for social performance. And there are
those other discussions about whether a grant can be thought of as an
investment and if the nonprofit sector has a capital market or just a
charitable mess...
The latest (and what set me off...) is that I just got an email from
someone telling me another leading business magazine is doing a piece on
this topic, which is probably (depending on how they handle it...) not a
such a totally horrible thing...
And, yes, I must confess that some of the folks I know and admire
most in this "field" have referred to these issues as a question of
"blurring" (see Sector Blue Report ). Hell, even my favorite academic, Greg Dees,
(with whom I have co-edited two books and for whom I have incredible
respect) has on several occasions used the concept of "blurring" in his
writings, something i have heretofore had the good graces to overlook in
our personal dialogs...
However, the bottom-line is that to use the word "blur" has the connotation of something having
gone astray,
run amok,
become involved in mission drift
or a modest distortion of reality...
And it is fundamentally the wrong way
to think about what is in play, which is (at its core) value creation
by organizations and those that provide capital (in whatever form or
with whatever expectation of returns) to them...
This is not a question of good or bad or what have you, but rather
one of folks just looking at the world through their existing lens and
not rising above the present framework to understand the emerging, deeper paradigm shift...(I'm sorry to have to resort to using the "p-word.")
So, alas, this question of "blur" has now become one of my pet peeves...
These inquiries would be amusing if it didn't take up so much of our
time and other people's effort (I will, myself of course, make the singular effort to address this question in this brief blog and perhaps in the inaugural issue of a new magazine--called Value--that a group of us are working on and hope to publish early next year).
But then, that is it, over, fini...no mas...get it?
So, let's lay this baby to rest:
Value is non-divisible.
It is Whole.
You cannot put social value with nonprofits and economic value with for-profits and pretend that somehow that makes sense.
Please stop attempting to do so...
you may hurt yourself and that
would be a shame, since you know I care deeply about you, your
intellectual growth and personal, physical well-being...
I'm serious...
stop it now before you hurt yourself.
thank you.
Now, back to our discussion:
Here's why we have got to stop talking about what is happening as in any way a blurring, or somehow inappropriate:
Nonprofits represent 7% of the GDP of
the United States. This is big business, not some network of little mom
and pop operations. That 7% is, potentially, economic power.
Unfortunately, because so many nonprofits think of themselves simply
as purveyors of public goods and not private gain, the nonprofit sector
leaves huge chunks of economic value on the table, unleveraged in
pursuit of their mission. Take for example, private foundations with endowments:
Foundations make grants with 5% of the payout on their investments
and 95% of their potential financial leverage is invested in mainstream
companies and investment instruments with absolutely NO
consideration as to whether those investments advance or work against
the institutional mission that the corporation was created to pursue.
Now...what business would you
think of as being effectively managed where 5% of your assets are
driving 100% of your mission and 95% of your assets are (at best...)
neutral to that mission?
You wouldn't--you would ask for your money back and
run for the hills. But because we think of foundations as simply
charitable grant makers and not investors in value creation, we think
this is not only okay, but "good foundation asset management." If
foundation grant making were a huge chunk of the nonprofit capital
market, fine...but they represent less than 3% of the capital flows of
the space (See "Money Matters"). All they can hope to offer is leverage of their financial and other assets--not just functioning as charitable ATMs kicking out $20 bills to whomever has the right PIN!
We think this is okay, because we think we can separate economic
leverage and impact from social leverage and impact--and we can not...
Or, think about for-profits:
Is it just me, or are these for-profit guys everywhere?
I go out in my car (hell...I BOUGHT my car from a for-profit!) and i see them all over the place in town, along roadways...man, they are just everywhere.
I pick up a paper, and BLAM, there it is: they even have their own newspaper section!!
Seriously, these business people are everywhere and totally out of control...
So, do you really think they only affect your life when you go to
clip your investment coupons or look at the (hopefully...) increasing
balance in your IRA?
Of course not...
Business potentially creates profound social value--they have social capital, they are a part of our community culture and society (for good and bad) and they effect how you LIVE, which is a profoundly social act, no?
With all that in mind, the main point, then, is this:
The question of whether nonprofits and for-profits are blurring the
lines is a ridiculous question because they are fundamentally engaged in
creation of both social and economic value,
which are themselves wrapped in the environmental context in which those
activities occur. Our problem is that we've simply created two
legal forms (the nonprofit, 501-c-3 and the for-profit LLC or
other corporate form) to accommodate our misplaced notion that the
value created by organizations must be either social or economic; good
or bad; up or down...
when in point of fact, the value created by us in the course of our
lives, loves and work is fundamentally non-divisible, whole and BLENDED.
Value is like the light spectrum above...
Al Gore,
talks about how as Vice-President he received daily briefings from
intelligence service folks that included not just pictures, but x-ray
analysis, infra-red analysis and so on. Now, just because you could not
see or place a definitive valuation on the presented imagery does not
mean it did not exist. You understood it all as being a progressive
blend, moving along a spectrum of light--which was whole and there and
real. And which when taken together gave you the full picture of what
was happening in terms of our nation's security...
The same is true in this case.
Value flows in form and kind along a spectrum where various shades of
value color progressively blend from one to the other to an as yet
still being defined third color. Value blends, as my colleague John Elkington has put it and as we discuss in an upcoming article in the next issue of the California Management Review.
What we should be concerned with is not the transitional perception that within our current frameworks of nonprofit and for-profit this may appear as a blur.
Rather we must step back and gain a vision of the full, total value spectrum and see what THAT fundamental insight means for how we understand concepts such as
- value,
- organization,
- performance and valuation metrics,
- capital allocation,
- and--I hate to go there this early in the morning, but...our very lives, since you KNOW that the value of your life is not simply a function of your work or
personal life, but rather it must be all assessed as a whole, with
distinct parts that form the full, blended life you seek to maximize the
worth and value of having lived!
Think about it:
The personal is political is professional.
Value is whole and flowing and like a tossed salad where each
component part contributes to the total blend of flavor in our mouth and
perceived by our brains...
Value is Blended, so go forth and maximize all its parts!
Happy Hunting!
